Is it time to overhaul the restaurant star system?

by Stuart Pallister, EHL Hospitality Insights

When leading chef Joël Robuchon came to EHL recently to receive an honorary professorship he touched on profitability and business pressures. “I think it’s increasingly difficult to run a gourmet restaurant. Regarding profitability, you need a lot of personnel and a substantial upfront investment,” he said. “They will always have their time and place, notably for special occasions, but I don’t think it’s what customers want right now, or will want in the future. This is why the Ateliers have done well.”

It was Robuchon’s Atelier concept which ‘dismantled’ the notion that you could only get a three-star rating for your restaurant if you have “a luxurious setting, with exquisite glass, china and silverware,” says EHL senior lecturer Frank Schuetzendorf.

“He broke down those barriers by bringing the guest to the kitchen and the kitchen to the guest basically, and seeing what is happening in the kitchen and seeing the creativity that is created right in front of the guests’ eyes.”

Schuetzendorf witnessed this for himself as director of F&B at the Hotel Plaza Athénée Hotel in Paris where Alain Ducasse reopened his three-Michelin star restaurant, taking away the tablecloths. “He said I just want to show this natural look of tables, the feel is extraordinary because you’re just sitting at this table with this natural product and as we do try to touch all five senses of the customers and create that experience it’s something that can be achieved by not always adding things but also by subtracting things.”

“It was a big revolution and Michelin took away one star right after the opening, but we regained that star after one year of operation because the maturity level of Michelin got up to speed and the customers basically found it very interesting and got used to the change. Also, with regard to the Michelin guide, it’s adapting also to what the future holds, not always looking back.”

Another three-star chef, Anne-Sophie Pic, had also told a workshop at EHL earlier in the year that three-star restaurants are “not necessarily intended to be profitable.”

“If chefs want to keep their three stars, in my point of view, they have to be creative and innovative all the time and that entails spending money and not hemming themselves in, while trying to please themselves and, more importantly, please customers,” she said. “For each product, you can’t look at the price tag if you want to be free; that is the price of being free. That’s the reason why our establishment has developed other activities, although we pour a lot of our energy into the three-star restaurant, which remains our showcase for haute cuisine.”

Schuetzendorf says that from an operational perspective, it’s extremely difficult to be profitable for a number of reasons. “The competition today is more and more fierce, spending habits have changed, people do not just dine out once or twice a month, they go out more often which means their spending budget for going out for meals will be slightly reduced.”

In addition, there are the various demands of the restaurant guides. “You need to have the room, the sommelier, the chef, the china, glass and silverware. You need to be able to pay the staff who are extremely expensive.”

“Just consider a Michelin-starred restaurant in Paris, you have one of those big kitchens with at least 20 persons in the back, at least 20 in the front … You need to produce a substantial amount of revenue to be profitable. And you’re not yet calculating all the losses you have with people cancelling, economic instability and potential threats that we have happening in today’s world.”

He says the terror attacks in France had resulted in a dramatic drop in revenues for hotels and restaurants. Hotel chains may be able to survive in crisis-hit locations due to their operations in other parts of the world, but “it's becoming more and more difficult and to remain competitive you have to please multiple palates.”

To do that, he says, you have to provide a unique signature dish, such as Robuchon’s potato purée, “but you will have to add some creativity, some novelty items and you will have to create some items that please maybe a new type of market segment.” This could be for the Chinese market, with more and more Chinese travelers coming to Europe. “Maybe we now need to introduce some kind of a Chinese component (so that Chinese tourists can) identify themselves with restaurants.”

That, however, can lead to a loss of “a certain part of identity, which these restaurateurs, these chefs, wouldn’t have been willing to give up maybe 20 years ago. Because back then we had the golden times, the ‘80s, the ‘90s, the Middle Eastern clients, the Russian clients, who were all wealthy and able to spend healthily and sustain operations. (Now) you have a lot of challenges that lie ahead.”

EHL assistant professor Marc Stierand has written extensively about creativity based on interviews with leading chefs. He believes money can be made and echoes Anne-Sophie Pic’s view that three-star restaurants, he says, are very often a showcase for haute cuisine. In addition, he says, there’s the possibility of chefs becoming restaurant consultants “to create products that are sold on a very large scale through supermarkets, to create menus in the first class [seating areas] of airlines. This is where the real money is.”

In his research, all the chefs told him that you have to keep in mind who your audience is and that, in itself, can bring difficulties. “On the one side you have the food [critics and] restaurant testers. On the other side you have your paying customers. Now, especially at the height of the so-called molecular gastronomy movement you had a lot of food journalists but also restaurant testers from the very well-known guides who wanted what I would call a ‘hypercreativity’ – creativity for creativity’s sake which led to food which is not necessarily food that you would like to eat.”

“What keeps these guys going – and this is very, very clear – is a very deep entrepreneurial spirit … Everybody who is hooked in the world of cooking – and for me a day without cooking is a lost day – you do that because it’s like (being) an artist. (If) an artist doesn’t paint, he dies. And it’s the same for these chefs. Of course there’s the business aspect. Of course they have to earn money, they have to feed their family (and) they have to pay the salaries of their employees …”

“The biggest expenses are the prime costs,” says Schuetzendorf, “the food and beverage costs, the labor costs. Now beverage costs are probably the most interesting one from a profitability point of view because … usually the margins are quite healthy.” Michelin-starred chefs all have one thing in common, though, “they really focus on the product and getting the right product” and that costs money. Citing Alain Ducasse, he says 60 per cent is the product, 40 per cent the cooking technique. “And when you consider it from that point of view, what’s the amount you want to invest, there’s actually no limit.”

Then, there is the issue of finding a property, say, in central London or Paris. If you want a prime location, Schuetzendorf says, you need to have “some kind of unique selling point from a property perspective and that will attract people to come to your location. So it’s not only about the food, it’s about the trip and the voyage and the experience above and beyond that they will have during their dining experience. But these costs, again going back to who is investing in these three-star Michelin operations, it’s the big palaces in Paris, large hotels that use it, as Marc mentioned, also as a leverage tool in marketing … And the rent does not get calculated into the profit and loss statement of such a Michelin-starred restaurant because it’s considered as a given.” If the rent were calculated into the P & L statement, the business would be in the red.

On the outlook for haute cuisine, Stierand says it has been vibrant until very recently but “slowed down a bit” in the last three years. Food is now “more recognizable as food to the normal consumer which I personally think is a good development. On the other side … there is clear evidence that the pressures of gaining one more star or two more stars – or losing a star – have undeniably an effect on your creativity, how free you feel you can act. And I think we should rethink that system because I think we may lose a certain creative beauty if we have too much pressure. A certain pressure is good. You have to keep the ball rolling, so to speak, but too much is counterproductive to creativity.”

Schuetzendorf says he looks at this from a more practical viewpoint. “We have to be creative in finding solutions so yes, the product is very important but there is a large opportunity which is popping up right now which is the supply of quality products at lower pricing. With globalization and the distribution channels (we have) nowadays, more and more companies are going into cooperative buying so they can exert more buying pressure on sellers. So we need to find creative ways of reducing costs without compromising quality.”

“Alain Ducasse dropped the tablecloths and Joël Robuchon decided not to use any silver any more. This is reducing substantial amounts of costs,” he says. “If you’re not using silver-plated cutlery any more, you’re reducing your silver costs probably by 50 per cent or more. So this has an impact on the bottom line. Now if we can expand that further, we can maybe not focus so much on the glassware which has to be crystal but maybe just glass, but high-quality glass; stainless steel silverware; china which doesn’t have to be exclusively produced in France in Limoges – that has to be transparent or translucent so that it reflects perfectly – and the lighting scenario for example. But if you can find creative solutions in reducing the costs in these areas, finding marketing partnerships, win-win solutions with maybe wine suppliers that will provide their marketing dollars for you to finance a certain part of your expenses, I think we don’t need to compromise on creativity in the kitchen. So I look at it more from a practical point of view. I think there are opportunities – we just have to explore and discover them because I think there’s a lot that has not been discovered yet.”

Frank Schuetzendorf is a senior lecturer at EHL. He was previously director of operations for Asia, the Middle East and Russia with Alain Ducasse Enterprise, based in Paris.

Dr Marc Stierand is an assistant professor at EHL and a fellow of the Lausanne Hospitality Research Center (LHRC). His research focuses mainly on creativity. He was previously an apprentice chef at two one-star restaurants in Germany.